Hi, I also need help with this question:

Consider a model of vertical differentiation where two firms offer goods with qualities v1 = 1 and v2 = 2, both produced at zero cost. There is a continuum of consumers that value a good of quality v as: s + xiv where xi (the marginal valuation of quality) is uniformly distributed along[1, 2].

a) What are the equilibrium prices for v1 = 1 and v2 = 2?

b) If firms choose their quality levels simultaneously (v1,v2) {1, 2}, before competition in prices take place, what would be the levels of (v1,v2)? Why?

Thank you!